Friday, August 26, 2011

Obama is smart, decent and tough, with exactly the right instincts about where the country needs to go. He has accomplished a lot more than he’s gotten credit for — with an opposition dedicated to making him fail. But lately he is seriously off his game. He’s not Jimmy Carter. He’s Tiger Woods — a natural who’s lost his swing. He has so many different swing thoughts in his head, so many people whispering in his ear about what the polls say and how he needs to position himself to get re-elected, that he has lost all his natural instincts for the game. He needs to get back to basics.

It’s crazy what’s happening in America today: We’re having an economic crisis and the politicians are having an election — and there is almost no overlap between the two. The president needs to bring them together. But that can only happen if he stops playing not to lose and goes for broke himself. Our problems are not insoluble. We need a Grand Bargain — where each side gives something on spending, taxes and new investments — and we’re on our way out of this.

Run on that, Mr. President: At best you’ll generate enough public pressure (now totally missing) to shame sane Republicans into joining you, and we’ll get a deal, and at worst you can run in 2012 on a platform, which, if you win, will actually give you a mandate for the change the country needs.

Meanwhile, Mr. President, on a rainy day, rent the movie “Tin Cup.” There is a great scene where Dr. Molly Griswold is trying to help Roy “Tin Cup” McAvoy, the golf pro, rediscover his swing — and himself. She finally tells him: “Roy ... don’t try to be cool or smooth or whatever; just be honest and take a risk. And you know what, whatever happens, if you act from the heart, you can’t make a mistake.”

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are who earn billions are getting a bargain 15 percent tax rate thanks to legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone shy away from a sensible investment because of the tax rate on the potential gain—not even when capital gains rates were 39.9 percent in 1976-77. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. What’s happened since? Lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

I know well many of the mega-rich are very decent people. They love America and appreciate the opportunity this country has given them. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

Tuesday, August 9, 2011

Standard & Poor’s, the rating agency, is the last place anyone should turn for judgments about our nation’s prospects.

America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S. & P. played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.

Nor did the bad judgment stop there. Notoriously, S.& P. gave Lehman Brothers, whose collapse triggered a global panic, an A rating right up to the month of its demise.

Wait, it gets better. Before downgrading U.S. debt, S. & P. sent a preliminary draft of its press release to the U.S. Treasury. Officials there quickly spotted a $2 trillion error in S. & P.’s calculations. And the error was the kind of thing any budget expert should have gotten right.

The episode hardly inspires confidence in S.& P.’s judgment.

And yet America does have big problems.

These problems have very little to do with short-term or even medium-term budget arithmetic. What makes America look unreliable isn’t math, it’s politics. And please, let’s not have the usual declarations that both sides are at fault. Our problems are almost entirely one-sided — specifically, they’re caused by the rise of an extremist right that is prepared to create repeated crises rather than give an inch on its demands.

The truth is that an aging population and rising health care costs will, under current policies, push spending up faster than tax receipts. But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.

So why can’t we do that? Because we have a powerful political movement in this country that screamed “death panels” in the face of modest efforts to use Medicare funds more effectively, and preferred to risk financial catastrophe rather than agree to even a penny in additional revenues.

The real question facing America, is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized.

Not the best day to report this, but the IRS says 1,470 millionaires paid no federal income taxes in 2009. Where did the money go? Tax "expenditures" (otherwise known as deductions, write-offs, subsidies or loopholes), charities, municipal bonds and tax payments to foreign governments, according to a recent IRS report (pdf) that ABC News noticed over the weekend and that the Los Angeles Timespicked up today.

More than 235,000 taxpayers earned $1 million or more in '09, with 8,274 making more than $10 million, the Internal Revenue Service said. All told, there were 140 million taxpayers.

Sunday, August 7, 2011

Thursday, August 4, 2011

"So little is asked of the upper class anyway. I mean, what percent of them or their kids are fighting in any of these wars? What percent of their day is occupied by the fact that there are men and women in positions over the world, risking their lives. If you walk down 5th Avenue, there's no sense of shared sacrifice." --Matt Damon

The Federal Aviation Administration has been partially shut down since July 23, when Congress failed to pass a bill allocating funding in time.

What this means: 4,000 FAA employees and 70,000 airport construction workers were immediately furloughed, the latter due to stop-work orders issued by the FAA to construction contractors. In addition to the furloughed workers, at least 40 safety inspectors are expected to continue working without pay, even covering their own travel expenses. Because Congress adjourned without passing funding, the shutdown will continue through September, delaying both airport construction and renovation projects intended to allow greater traffic, and an overhaul of the air traffic control system which promises to revolutionize air travel. It will also deny the government over $1 billion in revenue from ticket taxes, $200 million of which has been lost already. This savings is not being passed on to consumers, however, as airlines immediately increased fares by the same amount as the tax.